UNITED STATES of America, Plaintiff, Appellant, v. NEW ENGLAND COAL AND COKE COMPANY, Defendant, Appellee.
No. 6064.
United States Court of Appeals First Circuit.
June 4, 1963.
318 F.2d 138
Heard March 4, 1963.
In my judgment what the majority here holds does not keep the balance true. Stefanelli v. Minard, 342 U.S. 177, 72 S.Ct. 118, 96 L.Ed. 138. Chief Ruppenthal ordered the crowd on the sidewalk away on several occasions. He cleared out those who were watching from the vantage point of the main dining room on more than one occasion. He was not faced with a situation where he could ask the Nesmith group to leave. That would do no good. The leaving would create the moment of danger. I think his decision was a wise one and a fair one. I would commend him and the thousands like him in whose hands the safety of all the people rests. I respectfully dissent.
Francis J. Vaas, Boston, Mass., with whom James S. Eastham, William M. Brady, Boston, Mass., John J. Glessner, III, and Ropes & Gray, Boston, Mass., were on brief, for appellee.
Before HARTIGAN and ALDRICH, Circuit Judges, and GIGNOUX, District Judge.
GIGNOUX, District Judge.
The United States of America appeals from a summary judgment dismissing its action against New England Coal and Coke Company for the recovery of damages claimed to be due the United States by reason of alleged violations of the Walsh-Healey Public Contracts Act,
The Walsh-Healey Public Contracts Act, the pertinent portions of which are set forth in the margin,1 provides that
who contracts as such to furnish goods to the government, is responsible for the failure of its suppliers to comply with Walsh-Healey standards with respect to the employees of the suppliers.
The basic facts were found by a Department of Labor hearing examiner,3 and are not in dispute. New England has been a regular dealer in coal since its organization in 1905. It purchases coal from mines in coal-mining states, has the coal transported by ship to its docks in Boston Harbor, and delivers coal from its stockpiles there to industrial and commercial consumers in the New England area.
In the normal course of its business, New England successfully bid upon and was awarded four contracts with the government to supply coal, of a type known as Beacon Stoker, to various government installations in the Boston area during the period January 1, 1957 through June 30, 1959. Each contract represented that New England was a regular dealer in coal,4 and contained the other representations and stipulations required by the Walsh-Healey Act. Each contract also specified that the coal was to be obtained by New England from “Mary Frances No. 7” mine, which was owned by the Mary Frances Coal Company, of Pax, West Virginia.5
New England issued purchase orders to the Mary Frances Coal Company, which was one of its regular suppliers, for the amount of coal called for by the government contracts. Mary Frances was in no way affiliated with New England or subject to its control. To fill these orders Mary Frances obtained the coal which it sold to New England from three sources: (1) from its own Mary Frances No. 7 mine, produced by its own employees; (2) from so-called “contractors,” who mined coal on mining properties leased from Mary Frances; and (3) from other suppliers, who operated mines on other properties not owned by Mary Frances. Mary Frances collected, mingled and processed the coal from all these sources at its tipple at Willis Branch, West Virginia, for sale to New England and other customers in the normal course of its business. The coal sold to New England was shipped by railroad to the coast and from there by coast-wise colliers to New England‘s stockpiles in Boston. In addition, the Beacon Stoker coal from New England‘s other sources was mingled during shipment and in the stockpiles from which it made deliveries to the government.
The Beacon Stoker coal in New England‘s stockpiles was of the grade and quality required by the government contracts, although only a small percentage had in fact been secured from Mary Frances No. 7 mine. During the period in question, only 6.86% of this coal was purchased from Mary Frances, and the remaining 93.14% was obtained from fifteen other producing mines. The coal from all sources was intermingled. During the same period, only 11.64% of New England‘s total deliveries from its Beacon Stoker stockpiles went to the government.
The heart of the government‘s case is its contention that the phrase “all persons employed by the contractor” as used in the Walsh-Healey Act includes all persons “utilized” by the contractor in the performance of his contract, and is not limited to the contractor‘s own employees. From this, the government goes on to argue that the employees of Mary Frances’ suppliers were persons utilized by New England in the performance of its contracts, since the coal furnished by New England to the government included coal shipped to New England by Mary Frances, at least some of which was produced by Mary Frances’ substandard suppliers.7
We cannot agree. In our view, the interpretation suggested by the government runs contrary to the plain meaning of the language of the Act, the clear intent of Congress as manifested by the Act‘s legislative history, and any reasonable interpretation of the regulations and rulings issued under the Act. We also deem it significant that although the Act has been in effect since 1936, the government has cited no administrative or court decision which squarely supports its position.
Established principles must guide us in our construction of the Walsh-Healey Act as it applies to the issue raised by this appeal. “In matters of statutory construction the duty of this Court is to give effect to the intent of Congress, and in doing so our first reference is of course to the literal meaning of words employed.” Flora v. United States, 357 U.S. 63, 65, 78 S.Ct. 1079, 1081, 2 L.Ed. 2d 1165 (1958). Unless the contrary appears, it is presumed that statutory words were used in their ordinary sense. Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 7 L.Ed.2d 492 (1962); Massachusetts Protective Ass‘n, Inc. v. United States, 114 F.2d 304, 310-311 (1st Cir. 1940). A primary consid-
With these principles in mind, we turn to a construction of the statutory phrase “all persons employed by the contractor” in the context of the Walsh-Healey Act. The purpose of the Act is not disputed. At a time when Congress was deeply concerned with the improvement of working conditions, the governmental policy of awarding contracts to the lowest bidder favored the sweat-shop operator and the bid broker.9 Congress passed the Walsh-Healey Act in order to prevent the use of public funds to depress working conditions, and instead “to use the leverage of the Government‘s immense purchasing power to raise labor standards.” Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 507, 63 S.Ct. 339, 342, 87 L.Ed. 424 (1943); Perkins v. Lukens Steel Co., 310 U.S. 113, 128, 60 S.Ct. 869, 84 L.Ed. 1108 (1940). The principal methods adopted by Congress to advance its purposes were to limit the award of contracts for amounts in excess of $10,000 to established manufacturers and regular dealers, and to require of each contractor an undertaking to maintain certain minimum labor standards with respect to persons “employed by” him in the manufacture or furnishing of goods under the contract.
No definition of the term “employed by” is contained in the Act. However, the statute contains no indication that the term should be given other than its normal meaning, or that it does not con-
Applicable also to our consideration of the Walsh-Healey Act is what the Supreme Court said with reference to the Social Security Act in United States v. Silk, supra. The court there noted that it was not the purpose of Congress to make the Act cover the whole field of service to every business enterprise by including as employees all persons who rendered service to an industry. 331 U.S. at 711-712, 67 S.Ct. at 1467-1468; N. L. R. B. v. Hearst Publications, Inc., supra, 322 U.S. at 124-125, 64 S.Ct. at 857-858. The court then significantly stated (331 U.S. at 714, 67 S.Ct. at 1468):
“There is no indication that Congress intended to change normal business relationships through which one business organization obtained the services of another to perform a portion of production or distribution. Few businesses are so completely integrated that they can themselves produce the raw material, manufacture and distribute the finished product to the ultimate consumer without assistance from independent contractors. The Social Security Act was drawn with this industrial situation as a part of the surroundings in which it was to be enforced. Where a part of an industrial process is in the hands of independent contractors, they are the ones who should pay the social security taxes.”
Admittedly, the construction which the government urges upon us would extend the coverage of the Act, and to that extent further effectuate the policy of Congress in enacting the legislation. However, by no recognized concept can New England and Mary Frances be said to have had an employer-employee relationship. Even less, can such a relationship be said to have existed between New England and the employees of Mary Frances’ contractors and suppliers. If Congress in its use of the phrase “employed” had meant “utilized“, it could easily have said so. Congress not having done so, we find such an unorthodox construction not easy to imply.10
Were there any doubt as to the meaning of the language used by Congress in the Act itself, the legislative history
of the Act leads inescapably, we think, to the conclusion that Congress did not intend to make the contractor responsible for the labor standards of his suppliers. Section 1-A of the original bill, as passed by the Senate, S. 3055, 74th Cong., 1st Sess. (1935), required a prime contractor to obtain written representations or agreements from its suppliers that they would conform to the labor standards of the Act. Following hearings before the House Judiciary Committee, the bill was revised and reintroduced during the following session of Congress as H.R.11554, 74th Cong., 2nd Sess. (1936). Hearings before a Subcommittee of the House Committee on the Judiciary, 74th Cong., 2nd Sess., ser. 12, pts. 1 and 2, at 121-24 (1936). Under Section 2 of this bill, the prime contractor was responsible for the conduct of its suppliers and subcontractors but could shift responsibility for their compliance with the labor stipulations by giving them actual notice of the representations with respect to conditions of employment required by the Act. Representatives of business pointed out the practical difficulties imposed on a prime contractor by the application of the stipulations to the work of suppliers and subcontractors, including the necessity of segregating those supplies produced in conformity with the Act from those which were not. Hearings, supra at 241-43, 303, 358. On the other hand, the Secretary of Labor and representatives of labor opposed the provision permitting the prime contractor to escape responsibility merely by notifying its subcontractors or suppliers. Hearings, supra, at 212, 223. Following these hearings, the committee redrafted the original Senate bill in substantially its present form. The House Report which accompanied the bill made clear that the activities of suppliers were not within the coverage of the Act: “The bill as reported by the committee omits several features of the Senate bill to which serious objection was raised. It has not attempted to * * * lay down conditions for persons furnishing supplies to public contractors.” H.R.Rep. No. 2946, supra note 9, at 4.11
Our conclusion that the Act does not make a regular dealer responsible for the labor standards of his suppliers is entirely consistent with any reasonable interpretation of the applicable regulations and rulings issued under the Act.12 In fact, two provisions in the regulations and rulings would appear at least to imply an affirmative administrative recognition that the prime contractor is not ordinarily responsible under the Act for the labor standards of his suppliers. Thus, the regulations grant an exemption for certain coal dealers who do not qualify as regular dealers, and for that reason would not otherwise be eligible for government contracts, provided that such a dealer agrees to be liable for
The government strenuously urges upon us that the so-called “substi-
tute manufacturer” and “direct shipment” provisions of the regulations and rulings indicate a “consistent administrative interpretation” of the Walsh-Healey stipulations as applying to persons other than the contractor‘s own employees, an interpretation which it argues should not be overturned except for the most compelling reasons. See Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 315, 53 S.Ct. 350, 77 L.Ed. 796 (1933). By the “substitute manufacturer” provision, a contractor who shifts all or part of the work of the contract to another is made jointly liable with the party to whom the work is shifted for any failure of the latter to comply with the labor standards of the Act.15 The “direct shipment” provision imposes liability on a regular dealer‘s supplier, even though not a signatory to the contract, who ships the articles required by the contract directly to the
In each of the administrative decisions cited by the government,18 application of the Walsh-Healey stipulations to persons other than the contractor‘s own employees was justified in terms of either the “substitute manufacturer” or the “direct shipment” exception.19 In no case was the decision based on a holding that the employees of independent suppliers were “persons employed by the contractor” within the meaning of the
There remains for consideration only the government‘s contention that the designation of the Mary Frances No. 7 mine in New England‘s contracts expanded the “work of the contract” which New England agreed to perform to include the manufacture or production of the coal, and that hence New England must be held liable under the “substitute manufacturer” provision of the regulations and rulings, because it “shifted the work of the contract” to Mary Frances and its suppliers.21 Even if, as New England strenuously denies,22 specification of the supplying mine meant that only coal from Mary Frances No. 7
should have been delivered to the government and that failure to conform to the specification was a breach of contract which would have justified rescission of the contract by the government,23 we reject the suggestion that this provision can reasonably be interpreted as having expanded the “work of the contract” so as to include the mining and processing of the coal. New England entered into its contracts as a regular dealer, and in the performance of its contracts it acted at all times as a regular dealer. The only reasonable interpretation of the contracts is that both parties contemplated the “work of the contract” to be the furnishing of coal by New England from its stockpiles in Boston Harbor, and not the mining and processing of the coal by Mary Frances in West Virginia. Under these circumstances we can see no basis for the government‘s claim that by specifying the source of the coal it undertook to furnish the government, New England thereby undertook responsibility for its manufacture or production.24
We conclude that the Walsh-Healey Act does not make a contractor, who enters into a contract to furnish goods to the government as a regular dealer and operates as such in the performance of its contract, responsible for the labor standards of its suppliers. Ac-
cordingly, we hold that New England is not liable for the failure of Mary Frances’ suppliers to comply with the labor standards of the Act.25
A judgment will be entered affirming the judgment of the district court.
ALDRICH, Circuit Judge (concurring).
I concur in the opinion of the court, but in the light of the dissenting opinion wish to add a few comments.
No evidence was offered as to why the government requested New England to designate the mine from which it proposed to obtain its coal. I think if any inference is to be drawn it is that the government was there concerned with the quality of the product. This inference seems supported by the fact that the contract reserved to the government the right to demand a price reduction if some other mine was substituted. This is a far cry from Walsh-Healey compliance.
It is common ground that there was no evidence that the government possessed any knowledge as to whether the Mary Frances mine met the provisions of the act. Compliance may be a complicated matter, and I do not think, in the absence of evidence, we should assume that the contracting officers of the government had such knowledge. If they did, this was a matter peculiarly appropriate for the government to prove, particularly in a case where the burden of proof was up-on the government. Furthermore, this seems a very dangerous argument. Suppose, on further study, it had appeared that Mary Frances itself was a non-complying producer. Could it be said that in accepting Mary Frances the government had accepted whatever conditions were there in effect, and had made the Walsh-Healey Act, otherwise applicable, inapplicable? I do not think the fundamental issue involved in this case is to be determined by the naming or non-naming of some particular mine.
It may be conceded that the result in this case limits the application of the Congressional purpose to maintain wages evidenced by the act, if the act had that broad a purpose. However, I suggest this assumes the point. Congress is not a single voice, but a combination of voices. It is obvious that different Congressmen represent different interests, geographically, politically and economically, and that much legislation is a compromise between their different points of view. Individual Congressmen may accept a policy or purpose if, but only if, it has particular limits.
Putting this another way, absent ambiguity, and the dissent points to none, I think that the scope of the act is to be defined by what it says, and not by its believed beneficial purposes. The fact that a doctor prescribes one spoonful of medicine does not mean that he would prescribe a second.
HARTIGAN, Circuit Judge (dissenting).
I am constrained to dissent from the result which the majority opinion achieves. Here New England Coal and Coke Company entered into a contract to supply coal to the Government. The contract contained the express provision that the coal to be supplied was to come from Mary Frances #7 mine. No other mine was named as a supplier in the contract. The contract provided, inter alia, that:
“Section 3.—Mines
“(a) Coal from mines other than those stated in the Schedule shall not be furnished unless previously authorized by the Contracting Officer in writing.
* * * * * *
“(b) The Government reserves the right to add or to refuse to add additional mines other than those shown in the schedule and upon which award of contract was made. The Government reserves the right to require consideration by way of price reduction when additional mines are added to the Schedule at the request of the contractor.” (Emphasis supplied.)
There is nothing in the record showing that there was any authorization by the Government—written or oral—that the coal to be supplied under this contract could come from a source other than Mary Frances #7. This mine was in compliance with the provisions of the Walsh-Healey Act and we may assume that this was known to the Government at the time that it approved Mary Frances #7 as the source of the coal.
Under these circumstances, I would have no hesitancy in holding New England liable for the failure of Mary Frances’ suppliers to comply with the Act. It seems to me that—under the facts of this case—the majority‘s view is in conflict with the purpose of the Act. Under the Act, the Government has the right to demand that the coal supplied to it be produced under specified conditions relating to wages and working conditions. Here it sought to implement this right by entering into a contract with a “dealer“—naming a specific supplier—both comporting with the fair labor standards of the Walsh-Healey Act. Thereafter, the supplier named in the contract immediately turns around and hands over a significant portion of the work to be done under the contract to other suppliers which do not comply with the Act.
Although there is no question of New England‘s good faith involved here, I can perceive no difference in kind between the situation involved here and that of the now banished “bid broker” whose demise was one of the conceded purposes of the Act. Consequently, I believe that the court‘s opinion is an invitation to “facilitating avoidance of a fundamental public policy—fair wages and safe working conditions.” George v. Mitchell, 108 U.S.App.D.C. 324, 282 F.2d 486, 493 (D.C.Cir. 1960).
Herman Edward NELMS, Appellant, v. UNITED STATES of America, Appellee.
No. 8805.
United States Court of Appeals Fourth Circuit.
May 10, 1963.
Argued Jan. 14, 1963.
Notes
Ҥ 35. Contracts for materials, etc., exceeding $10,000; representations and stipulations
“In any contract made and entered into by any executive department, independent establishment, or other agency or instrumentality of the United States, or by the District of Columbia, or by any corporation all the stock of which is beneficially owned by the United States (all the foregoing being hereinafter designated as agencies of the United States), for the manufacture or furnishing of materials, supplies, articles, and equipment in any amount exceeding $10,000, there shall be included the following representations and stipulations:
“(a) That the contractor is the manufacturer of or a regular dealer in the materials, supplies, articles, or equipment to be manufactured or used in the performance of the contract;
“(b) That all persons employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract will be paid, without subsequent deduction or rebate on any account, not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the materials, supplies, articles, or equipment are to be manufactured or furnished under said contract;
“(c) That no person employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract shall be permitted to work in excess of eight hours in any one day or in excess of forty hours in any one week: Provided, That the provisions of this subsection shall not apply to any employer who shall have entered into an agreement with his employees pursuant to the provisions of paragraphs (1) or (2) of subsection (b) of section 207 of Title 29;
“(d) That no male person under sixteen years of age and no female person under eighteen years of age and no convict labor will be employed by the contractor in the manufacture or production or furnishing of any of the materials, supplies, articles, or equipment included in such contract; and
“(e) That no part of such contract will be performed nor will any of the materials, supplies, articles, or equipment to be manufactured or furnished under said contract be manufactured or fabricated in any plants, factories, buildings, or surroundings or under working conditions which are unsanitary or hazardous or dangerous to the health and safety of employees engaged in the performance of said contract. Compliance with the safety, sanitary, and factory inspection laws of the State in which the work or part thereof is to be performed shall be prima-facie evidence of compliance with this subsection.”
“§ 36. Same; liability for breach; cancellation; completion by Government agency; employee‘s wages
“Any breach or violation of any of the representations and stipulations in any contract for the purposes set forth in section 35 of this title shall render the party responsible therefor liable to the United States of America for liquidated damages, in addition to damages for any other breach of such contract, the sum of $10 per day for each male person under sixteen years of age or each female person under eighteen years of age, or each convict laborer knowingly employed in the performance of such contract, and a sum equal to the amount of any deductions, rebates, refunds, or underpayment of wages due to any employee engaged in the performance of such contract; and, in addition, the agency of the United States entering into such contract shall have the right to cancel same and to make open-market purchases or enter into other contracts for the completion of the original contract, charging any additional cost to the original contractor. Any sums of money due to the United States of America by reason of any violation of any of the representations and stipulations of said contract set forth in section 35 of this title may be withheld from any amounts due on any such contracts or may be recovered in suits brought in the name of the United States of America by the Attorney General thereof. * * *”
“41 C.F.R. § 50-201.101 Manufacturer or regular dealer. A bidder or contractor shall be deemed to be a ‘manufacturer’ or ‘regular dealer’ within the meaning of the stipulation required by section 1(a) of the Act and section 50-201.1(a) if he falls within one of the following categories:
“(a) A manufacturer is a person who owns, operates, or maintains a factory
“(b) A regular dealer is a person who owns, operates, or maintains a store, warehouse, or other establishment in which the materials, supplies, articles, or equipment of the general character described by the specifications and required under the contract are bought, kept in stock, and sold to the public in the usual course of business.”
In the administrative proceedings the government contended that Mary Frances and its president, as well as New England, were liable for such alleged violations. The hearing examiner held New England alone liable. 14 BNA WH Cas. 783 (1960). The Administrator affirmed the decision against New England, while expressing no opinion with respect to Mary Frances and its president on the ground that the government had not appealed that portion of the hearing examiner‘s decision. 15 BNA WH Cas. 250 (1961).
Nor do we find any merit in the government‘s argument that the convict labor stipulation,
“Section 1 (now
“(a) Contracts with a person who regularly buys and sells coal on his own account in lots of not less than a cargo or railroad carload, or with a person who is authorized by one or more persons engaged in mining coal to negotiate and conclude contracts for the furnishing thereof in such lots, are exempt from the requirement of section 1(a) of the act and § 50-201.1 of this part that such person represent that he is a manufacturer or a regular dealer in coal: Provided, however, That all the following terms and conditions are met: (1) That such person will notify the persons engaged in mining the coal that the purchaser thereof is the United States and that provisions of the Public Contracts Act are applicable; and (2) That such person, apart from the liability of the mines, shall be liable for the observance in the mines of all the labor standards provided in section 1 of the act; and (3) That such person notify the contracting agency that he will accept the contract upon the terms and conditions set forth above.”
“(a) If a manufacturer buys materials, supplies, articles, or equipment to be used in manufacturing the commodities required by the Government contract, and if it is the regular practice in the industry engaged in the manufacture of the commodities called for by the contract to purchase such materials, supplies, articles, or equipment and not to manufacture them, the vendor of such goods is considered a ‘subcontractor’ and the work performed by him is not deemed subject to the Public Contracts Act. Under like circumstances, the performance of services (for example, machining operations) by one other than the primary contractor, is not considered work subject to the Public Contracts Act.”
“(a) When a contractor undertakes a contract subject to the Public Contracts Act, he assumes an obligation to manufacture or furnish the commodities required under the labor standards of the Act. He may not relieve himself of this obligation merely by shifting the work to another. If, for example, a contractor is awarded a contract subject to the Act as a manufacturer, that contractor is liable jointly with the substitute manufacturer for any acts or omissions on the part of a substitute manufacturer which would have constituted violations of the contractor‘s contract if he had performed the contract in his own plant and had committed such acts or suffered such omissions in connection with that performance.”
“(a) Whenever a dealer, to whom a contract within the Act and Regulations has been awarded, causes a manufacturer to deliver directly to the Government the materials, supplies, articles, or equipment required under the contract, such dealer will be deemed the agent of the manufacturer in executing the contract. As the principal of such agent the manufacturer will be deemed to have agreed to the stipulations contained in the contract.—Regulations, section 50-201.104.”
“(a) Coal from mines other than those stated in the Schedule shall not be furnished unless previously authorized by the Contracting Officer in writing. Coal shipped in violation of this section may be rejected by the Government and in addition the contract may be terminated for default pursuant to the provisions of Section 15, Termination for Default.”
The government at no time claimed a breach of contract because of the delivery by New England of coal from sources other than Mary Frances No. 7 mine.